Changes to ISA rules and possible reforms to Inheritance Tax rules are among the potential announcements in next week’s Budget but the scope for tax cutting is limited, wealth manager Investec Wealth & Investment (UK) says.
Investec Wealth & Investment (UK), which provides products and services to help advisers build a competitive advantage and protect and grow their clients’ wealth, has rounded up the speculation ahead of the Spring Budget on March 6th which includes a raft of possible measures covering ISAs, pensions, Stamp Duty as well as personal taxation.
Possible ISA changes include the launch of a British ISA allowing investors to buy a certain amount of UK company shares without paying tax and reforms to the Lifetime ISA such as increasing the maximum property limit it can be used to buy from £450,000 and reducing or scrapping the 25% withdrawal penalty. House prices have risen 29% since April 2017 when the Lifetime ISA was launched.
On IHT, there is continuing speculation the tax, which raised £6.3 billion between April 2023 and January 2024*, could be amended or scrapped while in the property market there are rumours that Stamp Duty could be reduced after house sales and purchases fell 18% last year.
Pension announcements could include more detail on the lifetime provider model, or ‘Pot for Life’ while the age for being automatically enrolled into workplace pensions could be reduced to 18. There may also be changes to the pension saving annual allowance focused on the NHS.
Campaigners are calling for plans to halve dividend and capital gains tax (CGT) allowances to £500 and £3,000 respectively due to come into effect from April 6th to be reversed.
The key focus is likely however to be on changes to personal taxation including possible cuts to the basic income tax rate of 20% with a 2p cut costing an estimated £14 billion a year and a 1p cut in the region of £6 billion to £7 billion, according to the Institute of Fiscal Studies** (IFS). A further 1p cut in the rate of national insurance following a 2p reduction at the start of the year would be cheaper for the Government at around £5 billion a year, the IFS says.
Simon Taylor, head of strategic partnerships at Investec Wealth & Investment (UK), said: “The Budget is always a major focus for advisers and their clients with the possibility of major changes affecting financial planning for the years ahead.
“Clients are increasingly turning to advisers for support on tax issues driven in part by the problems they face getting through on the HMRC helpline. Our research*** shows nearly half (47%) of clients who use financial advisers to help with tax issues say problems getting through on the HMRC helpline is the key reason.
“There is a wide range of speculation on what could be announced in this year’s Budget with potential changes to ISAs, IHT, tax rates and reforms of pension rules. Whatever happens the number of people needing support and advice on their tax planning is likely to remain high driving the increasing demand for wealth management services.”
